CPI Good, Inflation Expectations Decreasing, Will the Fed Care (January 13 Market Recap) ?
Indices
- Dow 33,630, +484 or +1.5%.
- Nasdaq 10,569, +104 or +0.99%.
- S&P 3,895, +56 or +1.5%.
- USD10Y 3.569%, -31.0bp or -8.0%.
- WTI Crude $73.73/bbl, -$6.43 or -8.0%.
CPI Good
Both year-over-year (YoY) and month-over-month (MoM) headline CPI numbers showed a marked decline in inflation. The YoY number was +6.5%, the lowest it has been in a year and the MoM number, –0.1% was the first decline in prices seen since the onset of the pandemic. Core CPI (ex food and energy) also decreased YoY to +5.7% vs +6.0% last month although the more volatile MoM number rose from +0.2% to +0.3%.
Inflation Expectations Decreasing
Both the New York Fed and the University of Michigan 1-year inflation expectations decreased this week. However, the 5-year expectations of both surveys each rose by 0.1%. All this inflation data left the yield on the 10-year U.S. Treasury bond virtually unchanged this week but did move the CME Fed Rate Hike probability considerably: the odds for a 25bp hike now stand at 94.2% vs 75.7% one week ago.
Next Week
Earnings will begin in earnest next week and the markets will focus on the December Producer Price Index (PPI), the next inflation data point.
Economic Calendar
- Monday – Markets Closed in Observance of Martin Luther King Jr Day.
- Tuesday – Empire State Manufacturing.
- Wednesday – Retail Sales and Producer Price Index.
- Thursday – Initial Jobless Claims, Philadelphia Fed Manufacturing Index.
- Friday – N/A.
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
January 13 Daily Trading Recap…
Monday – Dow –112 to 33,517, Nasdaq +66 to 10,645, S&P -3 to 3,892, USD10Y –5.2bp to 3.517%.
- Six of eleven S&P sectors traded down today, led lower by Health Care, Consumer Staples, and Energy.
- An early morning rally was tamped down by comments from San Francisco Fed President Mary Daly that the Fed’s terminal rate should rest above 5% (the level at which they stop raising rates).
- However, the fixed income markets paid those comments no heed as the 10-year yield slumped 5.2bp to 3.5% and the probability for a 25bp rate hike jumped from 75.7% on Friday to 79.2% today.
- NY Fed 1 and 5-year inflation expectations came in lower and slightly higher respectively. The 1-year number was +5.0% vs +5.2% expected and the 5-year number was +2.4% vs 2.3% expected.
Tuesday – Dow +187 to 33,704, Nasdaq +97 to 10,742, S&P +27 to 3,919, USD10Y +10.4bp to 3.621%.
Wednesday – Dow +268 to 33,973, Nasdaq +189 to 10,931, S&P +50 to 3,969, USD10Y –6.7bp to 3.554%.
- All eleven S&P sectors traded higher today, led by Real Estate, Consumer Discretionary, and Technology.
- Markets rallied in expectation of a good CPI number tomorrow despite no other actionable news.
Thursday – Dow +216 to 34,189, Nasdaq +69 to 11,001, S&P +13 to 3,983, USD10Y –10.5bp to 3.449%.
- Eight of eleven S&P sectors traded higher today, led by Energy, Real Estate, and Communication Services.
- Jobless claims fell to 205,000 claims vs 215,000 expected and last week’s slightly revised higher print of 206,000 (originally 204,000 claims). Continuing claims fell 69,000 to 1.634 million.
- December Year over Year (YoY) Headline CPI was +6.5%, in line with expectations and vs last month’s +7.1% print. The YoY number was the lowest it has been in a year. Month over Month CPI was –0.1%, also in line with expectations and vs last month’s +0.1% print. This is the first decline in prices since the onset of the pandemic in 2020.
- December Core CPI (YoY) fell from last month’s +6.0% to 5.7%. MoM Core CPI rose from +0.2% last month to +0.3% this month.
Friday – Dow +112 to 34,302, Nasdaq +78 to 11,079, S&P +16 to 3,999, USD10Y +6.2bp to 3.511%.
- Eight of eleven S&P sectors traded higher today, led by Consumer Discretionary, Financials and Materials.
- January preliminary University of Michigan Consumer Sentiment Index rose to 64.6 vs 60.7 expected and last month’s 59.7 print.
- January University of Michigan 1 and 5-year inflation expectations came in at +4% vs December’s +4.4% and +3% vs December’s +2.9% respectively.
- JPMorgan Chase (JPM) and Bank of America (BAC), Citigroup (C), and Wells Fargo all reported better than expected quarterly numbers although JPMs CEO Jamie Diamond warned of an oncoming mild recession. Delta Air Lines (DAL) also beat their numbers.
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
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